Highlights of
Report Number: †2007-20-024 to the
Internal Revenue Service Chief Information Officer.

IMPACT ON TAXPAYERS

In this follow-up review, the Treasury Inspector General
for Tax Administration determined the Internal
Revenue Service (IRS) business cases used
to manage and fund specific information technology investments remain
inaccurate and unreliable, resulting in potential waste and
mismanagement of taxpayer dollars.

WHY TIGTA DID THE AUDIT

This
audit was initiated to determine whether
the IRS took effective corrective actions to address the recommendations in our
previous audit report, Business Cases for
Information Technology Projects Need Improvement (Reference Number
2005-20-074, dated April 2005). †Due to the number and significance of the
conditions reported in the April 2005 report, the Treasury Inspector General
for Tax Administration concluded the business cases could not be relied on to
manage and fund the IRSí information technology projects.

WHAT TIGTA FOUND

The
IRS took actions to address the weaknesses cited in our previous report;
however, most of the weaknesses remained unresolved.† Specifically: †(1) project costs were still being reported
inaccurately, (2) progress on development projects continued to be measured
inaccurately, (3) the software used to prepare business cases continued to
contribute to inaccuracies in the business cases, and (4) not all IRS major systems
were accounted for in the IRS 2007 budget submission and a business case was
not prepared as required.† Senior IRS executives and Department
of the Treasury and Office of Management and Budget officials still cannot rely
on the data in IRS business cases to manage and fund IRS projects.

WHAT TIGTA RECOMMENDED

The
Chief Information Officer should (1)provide
increased oversight to ensure Project Managers include complete and realistic cost
estimates for their projects; (2) coordinate with the Department of Treasury Capital Planning and Investment Control office to
follow Office of Management and Budget guidance requiring allocation of all
management and labor costs to specific projects; (3) provide additional
oversight of Project Managers to ensure sufficient care is taken in developing
and reporting progress data; (4) ensure reviews are conducted to determine
whether contractorsí cost and schedule procedures comply with industry standards;
(5) coordinate with the Department of the Treasury Capital
Planning and Investment Control office to correct the business case software
system so project costs are reported consistently; (6)implement access controls to ensure only authorized users have
access to the business case system; and (7) ensure the Director, Capital Planning and Investment Control, reviews the
IRS Federal Information Security Management Act Master Inventory of major
systems annually to ensure business cases are prepared for required projects.

In
their response to the report, IRS officials stated they agreed with all of the
recommendations, have taken some corrective actions relating to recommendations
1 and 3, and have plans to complete corrective actions for all recommendations
by October 2007.† The Chief Information Officer did not concur with our
outcome measures reported and disagreed that the IRS was putting millions of
taxpayer dollars at risk.† We believe the
outcome measures claimed in the report are appropriate because the business
cases were based on inaccurate, incomplete, and inconsistent cost
information.† Unreliable cost information
reduces the usefulness of the business cases and inhibits managementís ability
to make fully informed project finance decisions, potentially putting millions
of taxpayer dollars at risk.

READ THE FULL REPORT

To view the report,
including the scope, methodology, and full IRS response, go to: